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Net income of $14.48 million and diluted net income
per common share of $0.56.

Return on average assets of 1.09% and return on
average common shareholders' equity of 8.84%.

Net recoveries of $0.11 million and nonperforming
assets to loans and leases of 0.49%.

Average loans and leases grew $304.99 million or 8.03%
from the second quarter of 2015.

Average deposits grew $373.33 million or 9.51% from
the second quarter of 2015.

Net interest income on a tax-equivalent basis
increased $0.68 million or 1.62% from the second quarter of 2015.

Noninterest income increased $0.77 million or 3.56%
from the second quarter of 2015 (decreased 2.53% excluding equipment rental
income).

Noninterest expenses increased $1.79 million or 4.69%
from the second quarter of 2015 (increased 2.20% excluding leased equipment
depreciation).

South Bend, IN - 1st Source Corporation (NASDAQ:
SRCE), parent company of 1st Source Bank, today reported net income of $14.48
million for the second quarter of 2016, compared to $15.63 million reported in
the second quarter a year ago bringing the 2016 year-to-date net income to
$28.30 million compared to $29.14 million in 2015. The quarterly and
year-to-date net income comparisons were negatively impacted by a reduction in
net interest recoveries of $1.35 million and $1.41 million, respectively, a
higher provision for loan and leases losses of $1.24 million and $1.86 million,
respectively, and by the writedown of an available-for-sale equity investment.
These negatives were partially offset by gains of $1.02 million and $1.86
million, respectively, on a Volcker Rule required liquidation of a partnership
investment.

Diluted net income per common share for
the second quarter of 2016 was $0.56, versus $0.59 in the second quarter of
2015. Diluted net income per common share for the first half of 2016 was $1.08,
compared to the $1.10 earned a year earlier.

At its July 2016 meeting, the Board of
Directors approved a cash dividend of $0.18 per common share. The cash dividend
is payable to shareholders of record on August 2, 2016 and will be paid on
August 12, 2016. This brings dividends this year to $0.540 per common share
compared to $0.491 per common share at the same time last year.

According to Christopher J. Murphy III,
Chairman, “We saw solid growth in loans and leases and deposits again this
quarter as we continue to add new clients to the bank. Average loans and leases
were up a healthy 8.03% from a year ago and average deposits were strong, up
9.51% from that same period. Given the challenging low interest rate
environment, we had a steady performance overall. Just as importantly, credit
quality remains positive with net recoveries for the quarter. Net interest
margins continue to be negatively impacted by low interest rates and while flat
compared to last quarter are down 19 basis points compared to a year ago.”

“We continue to reinvest in our facilities
and this quarter completed renovations of our banking centers in Bluffton and
Huntington, Indiana, making the Fort Wayne region our first to be fully
renovated. We also started construction of a new larger office in the heart of
downtown Warsaw, Indiana.” Mr. Murphy concluded.

SECOND QUARTER 2016 FINANCIAL RESULTS

Loans

Average
loans and leases of $4.11 billion increased $304.99 million, or 8.03% in the
second quarter of 2016 from the year ago quarter and have increased $96.68
million, or 2.41% from the first quarter. Year to date average loans and leases
of $4.06 billion increased $319.32 million, or 8.54% from the first six months
of 2015.

Deposits

Average
deposits of $4.30 billion grew $373.33 million, or 9.51% for the quarter ended
June 30, 2016 from the year ago quarter and have increased $147.13 million, or
3.54% compared to the first quarter. Average deposits for the first six months
of 2016 were $4.23 billion an increase of $354.52 million or 9.16% from the
same period a year ago.

Net Interest Income and Net Interest Margin

Second
quarter 2016 tax-equivalent net interest income of $42.75 million increased
$0.68 million, or 1.62% from the quarter a year ago and increased $1.00
million, or 2.40% from the first quarter. Second quarter 2016 net interest
recoveries were down $1.35 million from the year ago quarter, resulting in an
11 basis point reduction to the net interest margin. Second quarter 2016 net
interest recoveries were slightly higher relative to the first quarter.

For the
first six months of 2016, tax-equivalent net interest income was $84.50
million, an increase of $2.58 million, or 3.15% compared to the same period a
year ago. Net interest recoveries for the first half of 2016 were down $1.41
million from the first half of 2015, resulting in a 6 basis point reduction to
the net interest margin.

Second
quarter 2016 net interest margin was 3.45%, a decrease of 19 basis points from
the 3.64% for the same period in 2015 and remained unchanged from the first
quarter.

Net
interest margin for the first six months of 2016 was 3.45%, a decrease of 16
basis points from the 3.61% for the same period in 2015.

Noninterest Income

Noninterest
income increased $0.77 million or 3.56% and $2.64 million or 6.40% in the three
and six month periods ended June 30, 2016, respectively over the same periods a
year ago. The increase in noninterest income was mainly due to higher equipment
rental income related to an increase in the average equipment rental portfolio
and gains on the liquidation of a partnership investment required by the
Volcker Rule, which was offset by lower monogram fund income and an other than
temporary impairment writedown on an available-for-sale equity security.

Noninterest Expense

Noninterest
expense increased $1.79 million or 4.69% and $4.44 million or 5.28% for the
three and six months ended June 30, 2016, respectively over the comparable
periods a year ago. The increase in noninterest expense was primarily due to
higher depreciation on leased equipment and increased loan and lease collection
and repossession expenses. Depreciation on leased equipment was higher as a
result of an increase in the average equipment rental portfolio. Loan and lease
collection and repossession expenses increased mainly due to lower recoveries
on repurchased mortgage loans and fewer gains on the sale of other real estate
owned.

Credit

The reserve
for loan and lease losses as of June 30, 2016 was 2.20% of total loans and
leases compared to 2.21% at March 31, 2016 and 2.25% at June 30, 2015. Net
recoveries of $0.11 million were recorded for the second quarter of 2016
compared with net recoveries of $0.68 million in the same quarter a year ago.
Year to date, net recoveries of $0.32 million have been recorded in 2016,
compared to net recoveries of $0.35 million for the first half of 2015.

Due
primarily to an increase in loan and lease outstandings and special attention
reserves, the provision for loan and lease losses for the second quarter 2016
increased $1.24 million compared with the same period in 2015 and was up $1.07
million from the first quarter. The provision for loan and lease losses for the
first six months of 2016 was $3.02 million up $1.86 million from the same
period in 2015.

The ratio
of nonperforming assets to net loans and leases was 0.49% as of June 30, 2016,
down from 0.55% on June 30, 2015 and down from the 0.51% on March 31, 2016.

Capital

As of June
30, 2016, the common equity-to-assets ratio was 12.30%, compared to 12.39% at
March 31, 2016 and 12.60% a year ago. The tangible common equity-to-tangible
assets ratio was 10.90% at June 30, 2016 and 10.96% at March 31, 2016 compared
to 11.09% a year earlier. The Common Equity Tier 1 ratio was 12.20% at June 30,
2016 compared to 12.37% at March 31, 2016 and 12.72% a year ago. During 2016,
the Company repurchased $8.01 million of common stock in several open market
transactions.

ABOUT 1ST SOURCE CORPORATION

1st Source
common stock is traded on the NASDAQ Global Select Market under “SRCE” and
appears in the National Market System tables in many daily newspapers under the
code name “1st Src.” Since 1863, 1st Source has been committed to the success
of the communities it serves. For more information, visit www.1stsource.com.

1st Source
serves the northern half of Indiana and southwest Michigan and is the largest
locally controlled financial institution headquartered in the area. While
delivering a comprehensive range of consumer and commercial banking services
through its community bank offices, 1st Source has distinguished itself with
highly personalized services. 1st Source Bank also competes for business
nationally by offering specialized financing services for new and used private
and cargo aircraft, automobiles for leasing and rental agencies, medium and
heavy duty trucks, and construction equipment. The Corporation includes 80
community banking centers in 17 counties, 8 trust and wealth management
locations, 10 1st Source Insurance offices, as well as 22 specialty finance
locations nationwide.

FORWARD LOOKING STATEMENTS

Except for
historical information contained herein, the matters discussed in this document
express “forward-looking statements.” Generally, the words “believe,”
“contemplate,” “seek,” “plan,” “possible,” “assume,” “expect,” “intend,”
“targeted,” “continue,” “remain,” “estimate,” “anticipate,” “project,” “will,”
“should,” “indicate,” “would,” “may” and
similar expressions indicate forward-looking statements. Those statements,
including statements, projections, estimates or assumptions concerning future
events or performance, and other statements that are other than statements of
historical fact, are subject to material risks and uncertainties. 1st Source
cautions readers not to place undue reliance on any forward-looking statements,
which speak only as of the date made.

1st Source
may make other written or oral forward-looking statements from time to time.
Readers are advised that various important factors could cause 1st Source’s
actual results or circumstances for future periods to differ materially from those
anticipated or projected in such forward-looking statements. Such factors,
among others, include changes in laws, regulations or accounting principles
generally accepted in the United States; 1st Source’s competitive position
within its markets served; increasing consolidation within the banking
industry; unforeseen changes in interest rates; unforeseen downturns in the
local, regional or national economies or in the industries in which 1st Source
has credit concentrations; and other risks discussed in 1st Source’s filings
with the Securities and Exchange Commission, including its Annual Report on
Form 10-K, which filings are available from the SEC. 1st Source undertakes no
obligation to publicly update or revise any forward-looking statements.

NON-GAAP FINANCIAL MEASURES

In addition
to the results presented in accordance with generally accepted accounting
principles in the United States of America, this press release contains certain
non-GAAP financial measures. 1st Source Corporation believes that providing
non-GAAP financial measures provides investors with information useful to
understanding our financial performance. Additionally, these non-GAAP measures
are used by management for planning and forecasting purposes, including
measures based on “tangible equity” which is “common shareholders’ equity”
excluding intangible assets.